Public Bill Committee

[Mr Andrew Turnerin the Chair]
Written evidence to be reported to the House
SCD 10 National Council for Voluntary Organisations (NCVO)

Clause 9 ordered to stand part of the Bill.

Clause 10  - Overpayments

Question proposed, That the clause stand part of the Bill.

Cathy Jamieson: It is a pleasure to be back in Committee this morning. We made good progress during the last sitting, and I hope we can do so again today because there are some very important issues to discuss.
It may therefore seem rather strange to take a stand on this clause, which on the face of it appears fairly straightforward and provides for overpayments and top-up payments to be repaid to HMRC. The clause states:
“If—
(a) an amount is paid to a charity under section 1, and
(b) the charity was not, or has ceased to be, entitled to it (because of section 2(3), 3(2), 4 or 9, or otherwise),
the amount must be paid to HMRC.”.
The Opposition are not suggesting that an amount paid to which the recipient was not entitled should not be repaid, but I want to ask the Minister a number of questions. How, for example, is it anticipated that such overpayments will be collected from the charity in question? Will the Minister also explain the issues that may arise for individual board members or trustees of particular charities if such amounts have to be repaid?
Are there circumstances in which HMRC would not seek to reclaim overpayments, and they would be written off? The Bill as drafted does not seem to provide for that possibility. In the case of child maintenance, for example, there are circumstances where, with the best will in the world, the Government might decide that it is impossible to reclaim the outstanding amount, or that doing so would cost more than the amount itself. However, there is no provision in the Bill before us to write off such an amount in such circumstances. Therefore, it would help if the Minister could provide an explanation, or if he told us that this issue will be dealt with in yet another set of guidance. I am beginning to think that if charities had a pound for every word of the guidance, we would rapidly be approaching the cap that has been set on the amount of top-up payments to be made under the Bill.
Also, is there going to be a link in terms of gift aid payments? For example, where such a payment has been made, rather than reclaiming it or having that sum paid back, HMRC has the option of taking back from gift aid payments that would be payable to the charity at some point in the future. It would be helpful if the Minister responded to those points.

Gareth Thomas: Perhaps it would help if the Minister considered an imaginary but nevertheless plausible example: if the Second Bromsgrove Scouts made a claim and HMRC demanded it back. In what circumstances would they have to pay it back? In what circumstances would the payment, wrongly delivered, be written off?

Cathy Jamieson: My hon. Friend puts in straightforward language exactly the type of questions that the Minister should answer. We have had a great deal of discussion about the Bromsgrove Scouts, and this typifies the kind of situation that many charities and small organisations throughout the country would be concerned about. People rightly worry about the powers of HMRC, about getting on the wrong side of that organisation. No one is suggesting that there will circumstances in which people should not pay money back if payments have been made inappropriately or they were not entitled to those payments. However, in the real world of small charitable organisations, all of us who have been involved with them know that there are times when funding comes in and is used to keep the organisation running and is spent on ongoing costs, and some small organisations may get into serious difficulty.

Fiona O'Donnell: My hon. Friend makes an important point. The Minister and all of us need to remember that small charities, in particular, are made up of volunteers who may not be accountants or lawyers—who may not have that background—and if we do not want to deter them from taking advantage of this scheme it is really important that the Minister spells this out clearly for them.

Cathy Jamieson: I thank my hon. Friend and welcome her to the Committee. She has been in considerable distress because of her injury and because she has missed the Committee. I know that she wanted to make a number of points on behalf of organisations in her area, and I am sure she will have the opportunity to do so today. She makes a powerful point that I want to probe the Minister on. What are the responsibilities of board members and trustees of charities—or the people who run Bromsgrove Scouts or another such organisation—if difficulties arise over overpayments being repaid to HMRC? What will HMRC do in those circumstances? Will HMRC be able to arrange repayments over a period of time; will it take enforcement action if repayments are not made; what position will that put the charities and individuals involved in; and what is the position regarding the link to gift aid payments? Will there be a facility for any overpayments to be offset against gift aid payments due to come from HMRC at another stage?
I will not labour the point any further; I think I have raised the questions that charities and voluntary organisations will be most concerned about. I hope the Minister can give some immediate responses to those questions and some comfort to those organisations—that nothing will be done to make it more difficult for people to operate Scout groups or small charities at local level, or to deter volunteers from taking up positions on charitable organisations, boards and management committees. I look forward to hearing what the Minister has to say.

Nigel Mills: It is a pleasure to serve under you again, Mr Turner. This seems an eminently sensible clause: none of us wants a small or even a large charity to claim something it should never have been entitled to, to have somehow been paid it and for us to have no power to force it to give the money back. We clearly need this clause, but it might be better if were titled not “Overpayments” but “Undue payments” or “Inappropriate payments: recovery thereof”.
The clause refers to getting money back from charities that have suffered a penalty and are therefore not entitled to claim; or charities which used the money that was donated not for the charitable purpose; or charities which were connected and therefore not entitled to make multiple claims. None of those are particularly contentious points. I wholeheartedly agree that we need to get the guidance right—we do not want HMRC carrying out ridiculously detailed, inappropriate audits, or clobbering charities for something they probably have not done. We need the clause. It is entirely appropriate and the key, as so often, is to make sure that HMRC implement it in a fair and constructive way, rather than as a proverbial baseball bat to beat people round the head with.

Fiona O'Donnell: It is, indeed, a pleasure finally to be here to serve under your chairmanship, Mr Turner. I apologise for not having been able to join in so far, but I have been following proceedings. I want to raise some concerns about clause 10, as my local area is about to register our charity, the East Lothian food bank. Although we will have to wait three years before we can take advantage of the Bill, I want to know if the Minister will be issuing guidance to HMRC on whether the method by which it will recover the money will lead to that charity ceasing operation. Obviously, we do not want charities to fold because of the thought of having to repay money in a way that threatens their sustainability. As we know, the charitable sector is struggling enough now, so I want some assurances from the Minister that HMRC will always negotiate with the charity looking at its health and the health of the people using its services.

Sajid Javid: I thank the hon. Member for Kilmarnock and Loudoun and the hon. Member for Harrow West for their comments and questions, which I shall try to answer. I welcome the hon. Member for East Lothian to the Committee. It is nice to see her.
The clause provides for overpayments of the top-up payments made to charities to be repaid to HMRC. Clearly, all members of the Committee accept the principle behind such a provision. An overpayment can arise for various reasons: for example, if the charity incurs a penalty in respect of its gift aid claims so that it no longer qualifies for the top-up; or because the top-up received by the charity is not applied for charitable purposes.
As we have heard during the debate, certain conditions are attached to charitable purposes that must be met, such as the community buildings rule. If no charitable activity were taking place, that could cause an overpayment. Furthermore, an overpayment could occur because connected charities did not pool the donation limit before they made a claim. If an overpayment arises for such reasons or for another reason, the charity must repay the amount to HMRC. How HMRC will recover overpayments from charities will be set out in the small charitable donations regulations—the administrative framework of the scheme. When we consider the next clause we will discuss that framework and the draft regulations that have already been published.
I want to touch in a little more detail on how the provision might work in practice. Overpayments will be reclaimed by HMRC in the same way that it currently claims back overpayments for gift aid. A claim form for gift aid and the scheme will have boxes for charities to show whether they have already received an overpayment. In answer to the question from the hon. Member for Kilmarnock and Loudoun, overpayments can then be set against gift aid payments or other liabilities that the charity might have to HMRC, such as PAYE. As we expect, HMRC will exercise its collection and management powers in cases of genuine difficulties. Where the overpayment was clearly unintentional or a mistake, particularly in the case of a small charity that does not have enough resources, HMRC will have sensible discretion to negotiate with the charity.

Cathy Jamieson: I thank the Minister for that information. However, the provision is becoming more and more complex, so I shall perhaps return to it later. Can he give some comfort in the event that HMRC makes an error and overpays? Is it the intention that HMRC can seek to have that money returned? In what circumstances would that happen, and how will the process be carried out?

Sajid Javid: If HMRC makes a mistake and overpays, it is right that HMRC will seek to have the overpayment returned. That is standard tax practice, and there is nothing unusual or unprincipled about it. Clearly, in such circumstances it will be even more important that HMRC work carefully with the charity, because it was HMRC, not the charity, that made the mistake. I would expect HMRC to work with the charity flexibly, such as by making time-to-pay arrangements—in other words, a negotiation to ensure that although the money will eventually be returned to HMRC, the charity can meet that burden without a negative impact on its activities.

Gareth Thomas: The Minister will not be able to do this now and I do not expect him to, but to help the Committee to reflect before Report on what he has said, will he provide us with an estimate of the level of error by HMRC in relation to gift aid payments? That will help Committee members understand whether we should probe the clause further or simply accept the standard practice.

Sajid Javid: To the extent that we have that information, I am certainly happy to find out more and provide the hon. Gentleman with it.
I want to say a word about guidance, which has been mentioned several times in the debate, including, understandably, by the hon. Member for Kilmarnock and Loudoun. It is not unusual in relation to such tax or finance measures that the guidance that clearly has to follow such a Bill is quite substantial. A Bill may be technical, and it is important that the guidance be sufficiently substantial and clear that those whom we expect to benefit from the Bill can make the most of it.

Cathy Jamieson: I asked the Minister whether there were any circumstances in which HMRC would decide that it was sensible to write off the debt and any repayment. As far as I can see, the Bill as drafted will not allow for that. Is that correct, or have I misunderstood?

Sajid Javid: I am not aware of any circumstances in which HMRC could write off an overpayment. However, I can foresee some in which the amount involved might be so small—or perhaps in which there is a particular unique situation—that pursuing and collecting it would not be sensible from the taxpayers’ point of view. I understand that HRMC could, under existing general rules, use its discretion to decide how to deal with overpayment of taxes, as well as this type of payment.
I want to remind the hon. Lady of the time when her party was in power. For the 66-page Tax Credits Act 2002 there were 400 pages of guidance, for the three-page Finance Act 2006 (Tobacco Products Duty: Evasion) (Appointed Day) Order 2006 there were 67 pages of guidance, and for the 108-page Climate Change Act 2008 there were 420 pages of guidance. There may have been good reasons for that, but I hope she is clear that having quite a bit of guidance on the back of Bills is not unusual.

Gareth Thomas: By citing those examples, the Minister is now suggesting that charities wanting to claim gift aid and having to wait for three years to access the small payments scheme will have to wade through not only the 60 or 80 pages of guidance for claiming gift aid that are already on the HMRC website, but at least another 66 or more pages to try to claim a maximum of £1,250. His admission cuts to the very heart of the Opposition’s concern that this is an overly complex way for small charities to get a small grant from the Treasury.

Sajid Javid: It is a nice try by the hon. Gentleman, but it is not going to work. That is not what I am saying at all. I am merely dealing with the point that legislation is followed by guidance. It is not correct for the hon. Gentleman and the hon. Member for Kilmarnock and Loudoun to suggest, both in this debate and in previous sittings, that it is somehow not right to have so much guidance and that it should be in the Bill.

Mark Durkan: Can the Minister give any indication of how wide or narrow the scope of “otherwise” in clause 10(b) will be in the guidance? Is clause 10(b) telling us that the reference will be to issues relating specifically to this legislation only, or will “otherwise” be cast widely? For example, if the Charity Commission decides that the Plymouth Brethren no longer qualifies as a charity, does that mean that HMRC would use that as a trigger point for recovery?

Sajid Javid: In the example that the hon. Gentleman gave, HMRC would clearly use other available information and be guided by the Charity Commission. HMRC will use a broad set of information when applying this clause.

Cathy Jamieson: When I first spoke about the clause, I wanted to probe particular circumstances where overpayments may be made, perhaps because of arithmetical problems. However, we need to probe further something that the Minister said earlier about top-up payments received but not used for charitable purposes, which links to what my hon. Friend the Member for Harrow West said about the definition of charitable purposes. I now worry about how the use of top-up payments will be policed. Perhaps the Minister can throw some light on that.

Sajid Javid: As with most matters pertaining to taxation, other top-up payments and the gift aid process itself, which is linked to this programme, there will be a degree of self-policing. There is no process whereby HMRC will be able to check and triple check every piece of information that it receives. There will be an auditing process, as there is with tax in general, perhaps on a random basis, and if HMRC received some kind of tip-off from insiders at a charity, it would be prudent to investigate to ensure that the rules are being met. It is a self-policing process in the sense that once the rules are known, HMRC’s expectation is that charities will abide by them. If it has reason to think that a charity is, as in the hon. Lady’s example, using top-up payments for a non-charitable purpose, we would expect it to investigate.
Returning to the question of the hon. Member for Foyle about the word “otherwise”, if a charity ceases to be a charity, it will no longer be eligible for this scheme, but HMRC works with charities while the Charity Commission inquires into a charity’s status. I hope that that is helpful.

Mark Durkan: I thank the Minister for that indication. How would HMRC deal with a situation where the Charity Commission in England indicates that it is no longer minded to regard a group such as the Plymouth Brethren as a charity, but the Charity Regulator in Scotland or the Charity Commission for Northern Ireland are offering no such indication and are saying, “No change”? How would HMRC reconcile the different interpretations among charity regulators? Would HMRC be specifically informed about such differences of interpretation when it considers the matter?

Sajid Javid: HMRC uses the Charities Act 2011 as the basis for whether a charity is a charity. As we have discussed on previous clauses, it is possible that the Scottish authorities could recognise an institution as a charity while for HMRC, using the 2011 Act as the definition of a charity, it could not be a charity. In such a case, the charity will not be allowed to use the scheme. We have discussed that before.

Cathy Jamieson: The Minister’s last point on organisations that are recognised as charities in the devolved Administrations but are not recognised as such under the 2011 Act raises some serious issues. I recognise that this is not the clause under which we should discuss that, but these issues have been raised previously and we will have to return to them.

Mark Durkan: The difficulty is that the Minister’s points sensibly deal with where charities are deemed to qualify for such payments, but the real issue with recovery is where charities are disqualified, and that is where an invidious situation could arise.

Cathy Jamieson: My hon. Friend makes an extremely valid point and I hope that the Minister will reflect on it. We may have the opportunity to discuss it at a later stage.
No one would suggest that there should not be a provision such as clause 10 to recover overpayments. It makes perfect sense to have that, but a number of scenarios have been presented this morning that raise concerns. The way the Minister went on to speak about self-policing, tip-offs from insiders and all sorts of other things going on within charities will put fear into many of the ordinary volunteers who sit on the boards of charitable organisations. They already worry about doing the right thing and ensuring that they have not done anything outside the rules.

Fiona O'Donnell: My hon. Friend will know that one charity very dear to the heart of the Government is the independent school, Eton. I wonder, in terms of self-policing, how vigilant the Minister intends HMRC to be about the independent schools sector’s use of this?

Cathy Jamieson: I take the point. [ Interruption. ] I hear hon. Members across the Committee shouting out the names of other independent schools. My hon. Friend makes a genuine point: there is an issue with organisations when not all their activities will be deemed to be for charitable purposes. That was the issue I was raising. Who will decide whether that particular top-up payment—remember that we are talking about £1,250—was being used solely for charitable purposes? The Minister has said that, in future, to a large extent, that will rely on self-policing, but, none the less, that HMRC would have the opportunity to come in and audit, spot check or do a whole range of other things.
I hope that the Minister understands that we are raising these issues in the context of proportionality. I do not know how many times he has mentioned fraud and all those issues in earlier debates, but we are concerned that more attention seems to be paid to potential fraud than to encouraging charities to take up the opportunity of getting the top-up payments. I do not want to reopen that debate at this time, but we have to ensure that whatever measure is there is proportionate.
The Minister’s tone is perhaps not in keeping with what we are trying to do at this point in the debate; he is possibly trying to make some party political attack on the previous Government in relation to guidance. I do not think anyone, during the course of our proceedings, has suggested that there is no need for guidance. However, we have been suggesting that it is not proportionate or sensible to build a structure around a relatively short Bill, which should do something straightforward—allow small charities and other organisations to get a top-up payment of £1,250—that would cost millions to implement, police, oversee, produce guidance and check the guidance, without even a review of whether it is working, from the Minister’s perspective. We are not saying that there should never be any guidance, but we are saying that it should help and encourage the charities and enable them to take up the top-up payments rather than become an end in itself.
In his earlier remarks, the Minister talked about connected charities. Again, I do not want to reopen the debates that we have previously had; maybe we will come back to them on Report. However, they have highlighted some of the difficulties, and I am concerned that he mentioned, in the context of potential over-payments, issues around connected charities. No doubt the Minister will say that the proportion that each charity would be likely to have to repay will again be covered in guidance.
I was pleased to hear the Minister say that HMRC would adopt what he believes to be a sensible approach and that there may be circumstances in which it would not be cost-effective to recover the whole cost. However, it is still unclear how individuals on the boards of charities or trustees could be affected and at what stage HMRC would decide that it was a sort of de minimus amount and not worth trying to recover. I am also concerned about the stress, the worry and everything else that would be there for charities—or for the Bromsgrove Scout troop, which has been mentioned several times—if an overpayment was made.
I am not suggesting that this clause should not stand part of the Bill; we need that information to be there so that overpayments are recovered when that is the right and proper thing to do. However, the Minister and his officials have some work to do in introducing a scheme that will give charities some comfort and will not put off volunteers from being on boards or becoming trustees. They should also address the points that my hon. Friends the Members for Foyle and for East Lothian made about the real world and the situations that charities currently face.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11  - Management of top-up payments

Question proposed, That the clause stand part of the Bill.

Cathy Jamieson: I wanted to make only a few opening remarks, because it is important that the Minister has the opportunity to speak on this clause. Clause 11 specifies that the management of top-up fees is going to be administered by HMRC and provides a power for HMRC to make various regulations to administer those payments under the scheme and for the purpose of administering and implementing the Act, to which the Minister alluded in the discussion of the previous clause. Subsections (3) to (6) set out the scope of the powers and it is intended—the Minister mentioned this in previous discussions—that the provisions made under this power will mirror as closely as possible provisions that apply to the administration of gift aid exemption claims under the taxes Acts.
The Bill provides for regulations to include an appeals process—something that we welcome. The power to make regulations under clause 11 includes the power to make provision in connection with clause 12, “the Change of charity’s legal form”. I know that the Minister has tabled fairly substantial changes to that, which we will discuss in due course. I do not particularly want to focus on that.
Subsection (9) provides for any amount of money calculated under the scheme to be rounded up to the nearest whole penny, which is a helpful bit of attention to detail. The example given states that 0.5p will be rounded up to the next penny, which I am sure will help people to understand the situation.
However, will the Minister discuss some of the enactments mentioned in subsection (4)(a) to (g) and in subsections (5) and (6)? If the Minister wants to think about how he will respond to that with practical examples, I am probing the wording to ensure that we all understand the powers in this primary legislation. The paragraphs of subsection (4) state:
“(a) providing for the payment of interest;
(b) requiring the provision of information;
(c) conferring a power of entry onto land;
(d) providing for the imposition of a civil penalty;
(e) creating a criminal offence (including, in particular, offences relating to the provision of false or misleading information or failure to provide information);
(f) providing for enforcement of sums owed (whether by action on a debt, by distraint against goods or in any other way);
(g) providing for appeals.”
Will the Minister give us some information about the thinking behind those provisions? My worry, as with clause 10, is that any ordinary person who becomes a member of a local charity’s board or indeed the leader of the Bromsgove Scout group—

Gareth Thomas: The second.

Cathy Jamieson: The second Bromsgrove Scout group, which is becoming famous and immortalised in our discussions. Any ordinary person will look at these provisions and wonder what on earth is going to happen and what powers are being given to HMRC, particularly regarding civil penalties, criminal offences and the powers of entry on to land. It is important that the Minister can explain what that means in practice.
I also want to probe subsections (5) and (6). Subsection (5) states:
“A power conferred by subsection (3) to apply or incorporate a provision creating an offence does not include power to increase the level of any punishment for which a person may be liable on conviction for the offence.”
That seems fairly straightforward in drafting terms to ensure that the Bill does not cut across anything relating to other legislation where criminal offences are specified, but I would like the Minister to clarify that. Subsection (6) reads:
“A power conferred by subsection (3) to apply or incorporate a provision imposing a civil penalty does not include power to increase the maximum amount of the penalty.”
Is that also standard drafting to ensure that nothing done in this Bill or by regulations will change the regime of civil penalties elsewhere?
I apologise for having to go through the provisions in some detail, but, once again, a provision that—for good reason—exists to give HMRC the opportunity to make regulations about the administration of top-up payments and administering the Act, which, on the face of it, no one would necessarily argue about, creates a range of complexities and issues that are not fully explained. The need for further guidance or rules could cause some considerable concern for the charities and organisations that we would want to benefit from the scheme. I look forward to what the Minister has to say.

Sajid Javid: I thank the hon. Lady for her comments. She asked several good questions that I shall try to answer. I agree that the clause is important and that we need to go through it in some detail. It gives HMRC powers to make regulations to implement and administer the small donations scheme. On our first day of detailed scrutiny, we debated exhaustively whether HMRC should administer the scheme, so I do not intend to run through that issue now.
Clause 11 is one of the most important clauses in the Bill. As the hon. Lady recognises, it gives HMRC wide powers to administer the scheme, so I shall take some time to set out what it will do and how it will work. It provides powers for HMRC to make regulations for the administration of top-up payments for the purposes of fully implementing the Bill. Regulations made under those powers may include applying the primary legislation that is already in place for gift aid, which incorporates rules on gift aid exemption claims, income tax repayments, and income tax or corporation tax that is due and payable. They also include primary legislation relating to the collection or management of income tax or corporation tax.
In a sense, clause 11 is the engine room of the whole scheme. All the day-to-day rights and responsibilities of charities and HMRC will be delivered through regulations made under its provisions. HMRC has already published draft regulations for consultation, and we will return to the House to debate them in more detail following Royal Assent.
We discussed the policy objective of the scheme earlier, but it is worth repeating that the new scheme is an extension of gift aid. Its purpose is to allow charities to collect a gift aid-style payment on small cash donations for which it is impractical to collect a gift aid declaration. If the scheme were a tax relief, like gift aid, it would have to be legislated for under the Finance Bill process, and claims under the new scheme would have been automatically covered by the administrative provisions under taxes Acts, including the Taxes Management Act 1970, and various Finance Acts. Of course, we have to legislate for the scheme through a separate Bill, but it complements gift aid and has been designed to work closely with it.

Gareth Thomas: The Minister will remember the evidence given to the Committee by Mr Clark, one of the experts who the Treasury consults regularly on charity taxes. Indeed, he was consulted about the preparation of the Bill. Mr Clark said that the original gift aid legislation was about 50% of the length of the Bill. The Bill’s provisions are therefore vastly more complex, yet the hon. Gentleman is introducing draft regulations and defending the amount of guidance he will have to publish. Will he tell us the length of the published guidance that he expects small charities such as the Second Bromsgrove and the First Isleworth Scouts to wade through to understand how they are to register for gift aid, and how they can eventually gain access to the scheme?

Sajid Javid: It is fair to say that the length of the guidance—whether that is 20 or 30 pages—is less important than its usefulness, because that is what charities will be looking for. As we have discussed, it is important that the first draft of the guidance is shared with the trusted working group with which HMRC has been working to ensure that that guidance covers all the bits and pieces that charities would expect, and that it is written in an understandable way. The draft guidance will be published at the start of the new year so that, before the whole scheme becomes operative, we can make sure that the charity community and other interested parties have the opportunity to respond to it and to try to improve it. I am sure that many will come up with some good ideas.
We want the provisions relating to the administration of gift aid claims to apply to the small donations scheme, although some will be modified slightly, when necessary. We do not want charities and CASCs to have to learn a new administrative framework for claiming under the scheme. Provided that charities know their responsibilities and entitlements under gift aid, they will broadly know their responsibilities and entitlements under the new scheme. The draft regulations that we have already published align the two schemes closely.
The provisions in the Bill specify the unique features of the scheme, including the amount of the top-up payment, the eligibility criteria and the community building rules. However, the general administrative framework for making claims under the scheme will be introduced through regulations, and that approach is intended to ensure flexibility in future. If the main tax administration framework changes, we will want the same rules to apply to the scheme, and we will not want to rely on the introduction of new primary legislation to ensure that the scheme follows the gift aid rules set out in taxes Acts. The effect of such regulations will be that amendments to relevant tax provisions will automatically apply to the scheme.

Cathy Jamieson: I thank the Minister for his explanation so far. I understand that he does not want to introduce new primary legislation whenever changes are made to tax laws, but will he explain the link between top-up payments and the regulations in paragraphs (a) to (c) of clause 11(3), which mention income tax and corporation tax? Will he give an example of how such taxes are linked to top-up payments?

Sajid Javid: If the hon. Lady will allow me to continue, I may come on to answer her question.
On the face of it, the powers under clause 11 are very wide, but they relate mainly to applying the rules on gift aid in existing legislation. HMRC will have the power to make regulations if there is nothing similar in place for gift aid—for example, when HMRC makes an overpayment of money to a charity. The administrative framework for overpayments of tax under gift aid does not fit the new scheme properly, so wholly new drafting has to be adopted.
The most significant and serious powers, such as the ability to apply a criminal offence, to which the hon. Lady has referred, will be done by keying into existing law. The power to apply such a criminal offence does not include the power to increase the level of any punishment, so HMRC cannot do whatever it wants. When it has to apply primary legislation to the scheme, relevant provisions will already have been debated and passed by the House, usually through a Finance Bill. A further safeguard is that clause 16 requires regulations to be made under the affirmative procedure, so there will be a further opportunity for the House to debate them before they come into law.
The draft regulations are technical—they mainly adopt the administrative provisions in the taxes Acts, albeit modified to apply to top-up payments—so HMRC has published a technical note to explain what they will do. They include provisions to apply criminal offences for certain non-compliant activities, which are necessary to deter—and, if necessary, to deal with—serious non-compliance and fraud. Those provisions already apply to gift aid claims. Fraudsters are likely to be attracted to the new scheme, as we have discussed several times, and without such provisions, they could attempt to abuse the scheme in the knowledge that there would be no real comeback if they were caught.
The non-compliance provisions will not affect the vast majority of compliant charities and CASCs claiming under the scheme, just as they will not affect those organisations already claiming under gift aid. The same rules and checks that HMRC follows when applying the provisions for gift aid claimants apply to the small donations scheme. The draft regulations also include the rules for charities that change their legal form under the provisions of clause 12, which we shall address in some detail when we debate that clause.
The hon. Member for Harrow West referred to the evidence session and talked about the length of the gift aid legislation. For his information, that legislation was 11 pages long; this Bill is 13 pages long.
The hon. Member for Kilmarnock and Loudoun asked about income tax and corporation tax. The gift aid rules are set out in the Income Tax Act 2007 and the Corporation Tax Act 2010, so the new scheme must be able to follow provisions in those Acts.

Cathy Jamieson: I thank the Minister for that explanation, but will he say more about why it is important that that is in the Bill? I understand how income tax comes into play in the context of gift aid, but I cannot understand why corporation tax comes into play for small charitable donations top-up payments. I might have misunderstood the taxation rules, so if he can explain the situation, I will be eternally grateful.

Sajid Javid: The hon. Lady asks a good question. If she will allow me, I will find out more and then let her know.
As I said, clause 11 gives HMRC the powers that it will need to make regulations to administer the scheme on a day-to-day basis. Charities will already be familiar with the rules because they mostly mirror gift aid, and there are in-built safeguards to ensure that HMRC applies its powers proportionately. I therefore commend the clause to the Committee.

Cathy Jamieson: I thank the Minister for his response to a number of questions and for offering to make further information available on several of them. I understand the points regarding subsections (4) and (5), which I wish to probe further. It is good to have that on the record. However, if someone involved with a charity reading that information was unfamiliar with how legislation is made about criminal offences and civil penalties, they might be rather frightened, concerned or worried, and they might wonder what on earth the powers were that could be used against them. Again, those are just some of the concerns about the drafting of the Bill.
The Minister is right to say that clause 11 is one of the most important clauses in the Bill. Partly because it is technical, gives powers to make regulations and is drafted in fairly technical language, charities and other organisations have not come forward with suggested amendments or changes. They have been more concerned about dealing with issues such as the matching provisions, the eligibility of charities, connected charities and community buildings, so it was important to debate and examine the clause in further detail.
As the Minister says, it seems that the clauses relating to gift aid have been transposed: the language and the drafting have been taken from other Acts and put into the Bill. There might be good reasons for putting all that in the Bill in the same way as in the legislation on gift aid, although I am still struggling to understand why some of the powers have been given here. I would genuinely like to hear from the Minister about the issues around income tax, corporation tax and so on, and how that fits with what was supposed to be a straightforward Bill to give top-up payments of £1,250 to small charitable organisations.
I will not prolong the discussion on this clause, but we may wish to return to it at a later stage if we are concerned about the powers that have been taken. I hear what the Minister has said about people being able to comment on the draft regulations and I agree that it is right that they should return under the affirmative procedure. On that basis, I do not suggest that the clause should not stand part of the Bill, but we may wish to return to it at a later stage.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12  - Change of charity’s legal form

Cathy Jamieson: I beg to move amendment 32, in clause12,page7,line37,at end insert—
‘(b) or a charity merges with another charity,’.

This amendment seeks to clarify that merged charities will also be covered by Clause 12.

Andrew Turner: With this it will be convenient to discuss the following: Government new clause 4—Charity mergers: new charity taking over activities of one charity .
Government new clause 5—Charity mergers: new charity taking over activities of several charities.
Clause stand part.

Cathy Jamieson: The Minister has a lot to say about the new clauses, so I will keep my remarks on our amendment short. There is a lot of substance and the Minister will want to give more explanation to his new clauses than can be provided in 50 or so words in the explanatory notes. Some of the representations that were made to us about changing charities’ legal form, including those from the Law Society of Scotland, sought, through our amendments, to ensure that provisions are adequate for all the circumstances in which a charity might opt to change its legal form. In the evidence sessions, the Law Society of Scotland noted that, while it believes that it is sufficient in respect of incorporation of charities, specific reference needs to be made in the case of mergers. Our amendment is simply to ensure that there will be a debate on this; it is simple and straightforward and may have been overtaken, to some extent, by the Government new clauses.
It is worth noting why this is important. Several charities may seek to merge in the current climate. There are many circumstances in which charities already share backroom organisation or project work; they may now decide that a merger would be appropriate. It is important that we do not disadvantage charities that have done that. Many people will be aware of organisations such as Help the Aged and Age Concern, Poppyscotland and the Royal British Legion, as well as several small, local charities, which have come together to work in this way. There are many circumstances in which that makes sense and we do not want charities to feel that taking that step, in order to be more efficient and work together, would cause them problems under the Bill.
It is important to hear what the Minister has to say about the new clauses, so I will let him speak and perhaps come back with questions, rather than focus on our small amendment.

Sajid Javid: I thank the hon. Lady. I recognise that the purpose of the Opposition’s amendment is to allow charities that merge to continue to benefit from the scheme. Clause 12 allows charities that change legal form to inherit the gift aid record from their predecessor charity; for example, if a charitable trust incorporates or a charitable company becomes a charitable incorporated organisation, it can continue to claim under the scheme if it was able to do so before. However, the clause does not apply to charities that merge, an issue raised during the public reading stage and by the hon. Lady on Second Reading. I have therefore considered the matter and tabled an amendment to take account of charity mergers, an intention set out in my letter to members of the Committee on 15 October. Let me set out the intention of our amendments, and why I believe the hon. Lady’s amendment does not quite achieve the effect that she intends.
We propose to remove clause 12 and replace it with two new clauses. New clause 4 would change how we treat a charity that changes legal form; for example, where a charity changes from being a charitable trust to a charitable company, it will be able to retain its gift aid history for eligibility purposes in the new scheme. The new clause differs from clause 12 in that it no longer requires the original charity to dissolve before the new charity can become eligible. We have been told by stakeholders that it can take some time to dissolve an old charity, even when the new charity is essentially the only one that is operating. We did not want to prevent new charities from claiming under the scheme while the legal details of the changes were being finalised, as that would unfairly disadvantage the new charities. Therefore, the new version of clause 12 sets out that, once the new charity has taken on the old charity’s activities, it can benefit from the old charity’s compliance history. To prevent abuse of that rule, we will require the new charity to have substantially the same purposes as the old charity. We will also require more than half of the charity’s managers to remain in place after the change of form.
The new charity must apply to HMRC before this provision can apply. Where the conditions are met, HMRC will certify that, in its opinion, the new charity was created with a view to taking over the old charity’s activities and that its purposes are substantially the same.

Cathy Jamieson: I thank the Minister for acknowledging that I raised the issue on Second Reading. I look forward to hearing further about the proposed changes. The Minister mentioned the 50% of managers criteria. Charities often merge or change when people move on to other posts. Perhaps there is an opportunity for streamlining in other ways. Has he given any thought to those circumstances?

Sajid Javid: I have given them some thought. That is why we have come up with the 50% figure, which we think strikes the right balance, and not 80% or 100%.
Returning to the certification requirement, where HMRC provides certification, the new charity can use the gift aid claims made by the old charity to establish its eligibility. That means that the new charity would not need to wait for three years after changing its legal form before it could claim for a top-up under the scheme. Some of the detail of how the rule will operate will be set out in regulations. HMRC will ensure that guidance is available to all charities before the commencement of the scheme.
The other major difference from clause 12 is that the provision for a change in legal form has been aligned with the new multi-charity merger provision in new clause 5. Charities will need to understand only one set of principles for changing form or merging, which leads me to the second proposed new provision, new clause 5.
New clause 5 sets out what happens when a charity merges with more than one other charity. It is a new provision and charities will welcome the extension of the scheme. The new clause will allow a new charity formed out of the merger of two or more separate charities to take on the compliance record of one of the old charities under the scheme. We need to prevent that rule from being abused by charities that have a poor or no gift aid record. Without any further restriction, such a charity could merge with an eligible charity to gain immediate access to the scheme. That is why I do not support amendment 32. We need to ensure that, to benefit from this provision, the newly-merged charity has a good compliance record. If each of the pre-merger charities is eligible to claim under the scheme, the new charity will also be eligible to claim immediately. HMRC will have had the opportunity to get to know each of the pre-merger charities already and assess their ability to claim gift aid correctly. HMRC can therefore be reasonably confident that the new charity will operate gift aid correctly, too.
There are special rules to determine which pre-merger charity’s gift aid history is adopted by the new charity. If any of the pre-merger charities is not already eligible to claim under the scheme, the new charity will take on the compliance history of that pre-merger charity. That pre-merger charity is the one that would have been the last to become eligible under the scheme if the merger had not gone ahead.
There is an extra rule if two or more charities that are not eligible on merger become eligible at the same time later. In that case, the new charity can choose which pre-merger charity’s history it wants to adopt. That rule avoids creating an incentive for charities with a poor compliance history choosing to merge as a way of gaining early access to the scheme.
As set out in earlier debates, these rules are important to ensure that the new scheme is protected from fraud. I do not intend to reopen the debate about fraud, but I remind the Committee that this scheme has a much lower level of paperwork, so there will be less of an audit trail between the donation and the claim under the scheme than there is with gift aid. HMRC will need time to get to know the charities and individuals to assess the risk of their claiming incorrectly under the scheme. If we did not have these safeguards, the scheme would be much more open to fraud and abuse. The Opposition amendment as drafted appears to allow only one charity to merge with another and so it would benefit fewer charity mergers than the Government new clause. Therefore, I ask the hon. Lady kindly to withdraw the amendment.

Cathy Jamieson: I am very happy to respond, although I have some other comments to make later. Given the Minister’s assurances, I will not push the amendment to a vote.

Sajid Javid: Following this debate, I hope that hon. Members now understand why these new clauses are necessary, and why they operate in this way. As I have explained, they allow charities to choose to benefit from their previous gift aid compliance history when they merge to form a new charity. They strike a fair balance between bringing charities into the scheme as quickly as possible and providing HMRC with some assurance that only charities with a good compliance history benefit. Where one of the pre-merger charities would not have been eligible under the scheme, the new clauses allow what history that pre-merger charity has to qualify towards the entitlement of the new post-merger charity.

Nigel Mills: I fully understand what the Minister is trying to achieve, but could he explain why he has chosen the mechanism of HMRC having to certify following an application? Most of the tax rule changes in recent years have moved us to a situation where someone self-assesses and HMRC chooses whether to agree. We appear to be using a model whereby HMRC has to certify based on an application, with some discretion on its part. Is that what he intends, or does he expect the charity applying to set out what it thinks the right answer is and HMRC can effectively sign that off? Alternatively, will the charity have to set out a load of options and HMRC can choose which it thinks is most appropriate?

Sajid Javid: Let us take the case of two charities that decide they want to merge, or perhaps to close one structure of a charity but create a new structure for essentially the same charitable purposes. Before taking that action, we would like them to check with HMRC to confirm that what they intend to do would work as far as this scheme is concerned. HMRC will be able to go through the facts with them; it is intended to be a process where, if charities ask for advice or are not clear on some of the regulations, HMRC can advise them. The intention is to ensure that such a merger does not go ahead without HMRC being made aware of it first, in case the merger unintentionally does not quite meet the rules set out by HMRC. For example, one of the key rules is that the new or merged charity must have substantially the same charitable purposes as the original two charities. It is important that the charities make sure that they are fulfilling all the provisions in advance of going ahead; otherwise, it might turn out to be a little too late to reverse something that they have done.

Nigel Mills: I am grateful for that explanation. It sounds much like a clearance application that businesses and individuals can make for various transactions. I am just a little intrigued by the drafting here: we are not proposing law that applies and people can then either interpret it themselves or seek guidance or clearance; we are actually proposing law which only applies if HMRC has issued that certificate. That is a slightly unusual way of making legislation in the modern world; it takes us back about 20-something years or something. I just wonder whether this an ideal way, whether we should just have the rules apply and have a clearance process rather than have an actual advance requirement.

Sajid Javid: My hon. Friend will appreciate that throughout our discussion of these scheme, one of the things that we have been most concerned about—rightly, because of the impact on public spending—is the potential for fraud. That is one of the reasons why it is important for charities to have to go through the process that I have outlined today to benefit from the merger procedures. The Government are adding flexibility. A number of charities have rightly raised the issue, and it is only right that we recognise that; but at the same time, we want to balance that in such a way that we minimise the opportunity for fraud. As we have discussed, there is a tiny number of people out there who have no charitable intention at heart and whose purpose will be to try to take advantage of generous tax breaks and this top-up scheme. We have to strike a balance to protect against that eventuality.

Cathy Jamieson: The Minister is being generous with his time, and that is important because, once again, it is extremely important to get the provisions right. In his deliberations, has the Minister looked at the history of any particular charity mergers and learned any lessons from them? For example, can he set out some circumstances in which HMRC might decide, by whatever form, that the objects of the new charity were substantially different and did not meet the criteria? During his research before tabling the clauses, did he find any examples where charities would have fallen foul of that provision?

Sajid Javid: In researching the clause and the amendments and deciding how to frame them, I had a number of discussions with officials. They assured me that there such examples do exist, particularly when they administered new gift aid and other charitable schemes through HMRC. I cannot give her a particular example, but the information they provided assures me that they do exist. When HMRC has looked at charity mergers in the past, it has worked closely with the Charity Commission, staying in regular contact and swapping information to ensure that it has all the information it needs to make determinations on questions such as charitable purpose.

Gareth Thomas: Does the Minister none the less accept that we should take seriously the concerns of the hon. Member for Amber Valley? Would he like to use this opportunity to point the hon. Gentleman in the direction of Opposition new clause 2, which would insert a formal review mechanism? If the hon. Gentleman still has serious concerns and he can convince the Minister and the rest of the Committee of their seriousness, the formal review new clause 2 would establish would provide an early opportunity to address those concerns.

Sajid Javid: I am sure that my hon. Friend has heard and duly noted the hon. Gentleman’s comments.

Sheila Gilmore: We seem to be proceeding on the assumption that people will go to extreme lengths to create elaborate scams, but the notion that charities will decide to merge so that they can claim the top-up payment does not reflect the charity world to which I am accustomed, and if we do proceed on that basis, we end up having to create elaborate structures around the Bill. Unless there is clear evidence that people would go to such lengths to claim the payment, perhaps we should have started from a simpler perspective.

Sajid Javid: The hon. Lady touches on the need for the a structure in the Bill to protect the taxpayer against fraud. She is right to say that we as Members of Parliament have no reason to have come into contact with those who intend to commit fraud, using the Bill or the related gift aid legislation, but it does happen and the Committee has discussed it before. HMRC estimates that at least £10 million a year of fraud is committed against the taxpayer under the gift aid scheme. It is incumbent on us to ensure that that is kept to a minimum, but we must also avoid putting too many hoops in front of the vast majority of charities, which are entirely legitimate and intend only to do good work. I hope that the hon. Lady respects that we must strike that balance.
As I have said before, because the legislation is entirely new in form—it is a top-up payment system rather than a tax relief system such as gift aid—we do not pretend that every aspect will work exactly as we intended right at the start. As with all new legislation, we will learn as we go along, which is why I have committed the Government to reviewing the Bill in three years. There will be lessons to learn, and if improving the scheme means adjusting the protections against fraud, we will look at that.
I commend new clauses 4 and 5 to the Committee and I ask the hon. Member for Kilmarnock and Loudoun to withdraw amendment 32.

Mark Durkan: It is a pleasure to be here again under your chairmanship, Mr Turner. Amendment 32 and new clauses 4 and 5 address what happens when charities merge; therefore, they all pick up on a genuine and legitimate question in the Bill. The extensive provisions of new clauses 4 and 5, including the rather clumsy introduction of HMRC advanced certification that has been addressed already, show that when we as legislators have to deal with a Bill and anticipate all the different questions, and indeed some of the possible temptations, that might arise, we risk getting into a predictive predicament, and that is exactly what the Minister is finding with new clauses 4 and 5.
The Minister has indicated that the provisions try to ensure that HMRC will have credible reference points when assessing what the real intent and purpose is behind any particular merger, but that means it has to look to what in other cases might be regarded as arbitrary reference points—for instance, the question of 50% of managers. If we are talking about large charities, how many people are we classifying in the bracket of managers? Are we talking about a single controlling personality or managers who have general control of the administration of the charity, which could include many people?
In Northern Ireland, we have legislation that uses particular thresholds of proportionality such as 50%, and that can often give rise to odd situations in which, to meet a numbers game, people are designated in a particular way for a particular time. They stay in a position for a short period, so that a 50% threshold at a given time is matched. Everybody knows that that is a purely temporary phenomenon, and at a future stage people move down or redesignate themselves in some other way. We want to ensure that the Minister is satisfied that the provisions in the clause do not give rise to a legitimate artifice that might be used for people to meet the terms of the certification. How long do managers have to remain in place post-merger to meet the 50% threshold? Does it have to be absolutely clear that it was intended all along that they would remain in place, and that if they moved subsequently, that was not going to lead to a question of overpayment, a review, an investigation or whatever?
Will the Minister clarify why new clauses 4 and 5 emphasise managers controlling the charity, whereas in clause 5, on connected charities, control centres on trustees or those who have the power to appoint or remove trustees? Clause 5 is about control on its own, whereas in the new clauses we are talking about the person having general control and management of the differentiation of a charity. Clause 5 deals with connected charities and the meaning of such charities. Its emphasis is on control in relation to trustees, but the other clauses have a quite different standard of control.
Did the Minister consider whether new clauses 4 and 5 should have included not only the question of managers, but should have allowed HMRC to refer to the position of the trustees as well when assessing who is in overall control of the merged charities and what the balance of interest and continuing influences is going to be? Mergers may happen when trustees and boards try to introduce more strength and rationalisation in their charity field, but that may or may not involve retention of so many managers from different charities.
Mergers take place across jurisdictions, and I bring the Minister back to the point that a charity in Scotland and one in Northern Ireland could merge together or with a charity in England. I would appreciate it if the Minister clarified that he is satisfied that new clauses 4 and 5 anticipate some of the issues that may arise. The new clauses make no reference whatever to the Charity Commission for England and Wales, and that for Northern Ireland, or the Office of the Charity Regulator in Scotland. The Bill has a “now you see it, now you don’t” syndrome.

Cathy Jamieson: My hon. Friend is making a powerful case. I am sure he is aware that organisations such as the Rehab Group, which works not only in different parts of Scotland and England, but in Ireland, have a cross-border component. It is a merger of different charitable organisations, including one in Scotland.

Mark Durkan: I thank my hon. Friend for making that point, which is a useful reminder that some issues will transcend different jurisdictions not just in the United Kingdom, but in these islands. The Minister will probably do what he has done previously, and go to the Batbelt, saying that everything will be done through guidance and review. I just hope he can assure us that the new clauses have been drafted, or will be revised or reconsidered, with an eye to accommodating several different issues that could arise. In particular, I return to the point about the Charity Commission for England and Wales, and that for Northern Ireland, and the Office of the Charity Regulator in Scotland.
Sometimes the Bill and HMRC seem to take their lead from the Charity Commission’s standards, but at other times HMRC seems to do its own thing with its own view of the charity world. To my mind, that can give rise to difficulties and concern for charities. For their own good reasons, charities may want to consider mergers, rationalisation and re-profiling, and if that is what they want, we do not want to create a feeling that they are under suspicion and must clear their motives, plans and intentions with HMRC.
Perhaps the Minister will tell us whether he is satisfied that the new clauses as drafted properly anticipate issues that may arise for charities with similar purposes and causes, but with different organisational profiles. Some charities may rely on a network of community buildings, and others may not. The Bill includes specific provisions differentiating various qualifying issues, and the new clauses should not cut across, contradict or cause unnecessary tensions with other provisions in the Bill.

Cathy Jamieson: Some important points have been made about the new clauses. As I indicated to the Minister, I do not intend to press the amendment to a vote. We tabled it because we believed that clause 12 creates some difficult situations relating to charity mergers. That issue, as the Minister accepted, was raised both on Second Reading and at the Bill’s public reading stage. I mentioned the Law Society of Scotland’s representations, but we also had a powerful representation from the Hospital Broadcasting Association that states:
“HBA welcomes the inclusion of this clause, which addresses a potential problem caused by a change in legal form of a charity (e.g. from an unincorporated association to a corporate form) as it develops. However, HBA is concerned that the change of status is restricted to a change in legal form. HBA would like to see the facility extended to allow HMRC to certify that a new form of the charity is substantially the same as an old charity, even if the legal form remains the same.”
The submission continues to discuss mergers, where
“two charities might become a single new entity, legally distinct from either of the original charities, but possibly of the same legal form.”
The HBA made the point that it would be
“unfortunate if the new charity were ineligible to make claims under the Small Donations Scheme for three years after the merger, and might result in the merger not taking place because of the loss over three years of up to £3,750.”
The HBA says that that might be a small figure in some contexts, but it would be “very significant” to a small charity. I am pleased to hear that the Minister has taken those representations into account, and I will therefore not press the amendment.
However, the problem with removing one clause and replacing it with two fairly complex new clauses is that we always have to ensure that we are not creating more difficulties or unintended consequences. Much of our discussion has revolved around, as my hon. Friend the Member for Edinburgh East said, the risk of potential fraud, which was discussed—perhaps disproportionately —to the extent that anybody looking in from the outside would wonder what the Bill’s purpose was; or the unintended consequences of the Bill’s wording that could erect unnecessary barriers to charities taking advantage of the scheme.
In that context, I have a couple of questions relating to the point about 50% of managers, as outlined clearly by my hon. Friend the Member for Foyle. His description of the predictive predicament was powerful. In primary legislation, we cannot deal with absolutely every potential set of circumstances that may arise, but, in order to get the legislation and the rules and regulations right, we have to look at what is going on in the real world. That was why I asked the Minister whether examples of real-life charity mergers had been examined and whether any lessons had been learned. I asked whether there were any scenarios where well-respected charities had come together and whether any issues had emerged from their being examined, such as areas where people would have fallen foul of the new rules.
As I said, my hon. Friend the Member for Foyle made a powerful point about the definition of a manager. Are we talking about chief executives or the senior level of charitable organisations, or about operational managers out in the field, running the day-to-day activities? For many years, I was the manager or director of a charitable organisation in Scotland. I took that charity through the process of changing from an unincorporated organisation to a corporate body, did much work around charitable status and worked with a number of other organisations and local government. To all intents and purposes, I was the only person in the staff team who would have been described as a manager; the rest were operational staff working directly with young people in the care system.
At that stage, should we have chosen to merge with another organisation with a similar structure—one manager—and both managers had decided that there was the opportunity for a new broom to come in and take the new organisation forward, would the 50% rule have been fallen foul of? I had been seconded from a local authority for a number of years, so it would have been perfectly reasonable for me not to go forward as a manager.

Fiona O'Donnell: I am well aware of my hon. Friend’s experience in the voluntary sector in Scotland and how that has informed her contribution. As a merger can often be an opportunity to reduce management costs, might it therefore be difficult for some newly merged charities to meet the 50% threshold?

Cathy Jamieson: My hon. Friend makes an important point. That is one reason why I asked the Minister why he had settled on 50%, and he explained that he had not settled on 80% because he did not want the rule to be restrictive. In fairly large organisations, 50% would perhaps allow for some flexibility, but I worry about the scenario in which only a small number of people are deemed to be managers.
My hon. Friend the Member for Foyle asked whether people are expected to stay in post for a certain time or whether the rule is applied at the moment of certification by HMRC, when the merger is deemed to take place. We must be careful that unintended consequences do not get in the way of the Minister’s intentions. In this instance they were, I think, good intentions—to ensure that charities have the opportunity to merge and not suffer penalties.

Mark Durkan: In my hon. Friend’s example of two charities that are deemed to have one manager each, the only way to meet the “more than half” rule would be to retain both managers. Is that really what the Minister intends?

Cathy Jamieson: That illustrates perfectly the potential dilemma, and links with the point that my hon. Friend the Member for East Lothian made. Charitable organisations sometimes feel that they have to merge because of financial circumstances, and sometimes because they want to move up to a different level and do new things. In such circumstances, surely it would be an unintended consequence if the new organisation was unable to have a structure that allowed it to do those things.
There is still uncertainty and it would be helpful if the Minister clarified who will meet the definition of “manager”. Are we talking about the chief executive—the director of the organisation—or about front-line operational managers? Regarding who is in operational control of the day-to-day work of a charity and who is in overall control of the ethos, direction and accountability of the board or the trustees, there is a slight lack of fit between what was discussed under the connected charities provision and what we are discussing now under the merged charities provision. A number of Members who perhaps did not have the opportunity to do so before, are now giving some thought to the issue. I appreciate that the Minister has introduced the new clauses in an attempt to be helpful, and I welcome that, but we have to consider some points in slightly more detail.
The hon. Member for Amber Valley also made an important point about the language used. HMRC “certifying” is perhaps not language that we are familiar with. The Minister responded by saying that HMRC would be available to give advice, work with charities and do all of those things. I am not entirely persuaded, given the responses to earlier debates in this Committee, that HMRC will necessarily have the expertise, opportunity or time to do that to any great extent over the process.
There is a difference between HMRC certifying a proposal from the charities by rubber-stamping it and saying, “Yes, that’s okay,” and its actively working with two or more charitable organisations on a merger process and whether it is advantageous and meets the requirements of the various schemes. Although I welcome what the Minister is trying to do, there are issues that need to be probed further.

Nigel Mills: Does the hon. Lady also agree that when we consider the new clauses, we must be careful about how they interact with the definitions of connected charities? If a new charity inherits more than 50% of the managers of an old charity, we fear that the new one will be connected to the old one because they had the same managers at some point in the tax year. If three charities merge into one, they may end up in the unfortunate situation of being entitled to only one third of the top-up payments claimed, due to an accidental mistake. I suspect that we do not intend to do that, but it probably means that the only way a merger can work is if it is done on 6 April.

Cathy Jamieson: The hon. Gentleman makes an interesting point. Again, that is why I was trying to probe the Minister on the extent to which the actual practice of charities merging had been considered. What happens in the real world, what scenarios are thrown up by those circumstances, and would any of those mergers have fallen foul of the regulations or rules that will be put in place? Again, do we really want HMRC’s time to be taken up with ensuring, as the hon. Gentleman suggests, that charities merge only on 6 April, or do we want it to do other things? I do not want to reopen that whole debate, but we must ensure that we do not end up with the unintended consequences of more and more bureaucracy and red tape and less opportunity for charities to get on with doing their charitable works within local communities or at the national level.
The issue is not just one for the larger charities. Increasingly, groups and organisations at community level are having to come together to ensure that they get the most from the pot of money available to them, whether from regular donations, top-up payments or anything else. Charities have increasingly come under the spotlight to ensure that their administrative costs are not excessive and do not appear unfair given what they do and the contributions they receive.
Can the Minister give some reassurance on those points, particularly about managers, definitions and who will decide? Will he also clarify the role of HMRC? That would allow us to move on.

Sajid Javid: I thank the hon. Lady for her general support for the intentions behind the Government’s proposed changes. I also thank the hon. Member for Foyle for his questions. He made some good points, as did the hon. Lady. I will try to answer some of them now.
On the issue of managers, the hon. Member for Foyle asked what “managers” means. It is defined in the new clause as
“the persons having the general control and management of the administration of a charity”.
It is important to point out—hopefully this will give him some comfort—that the term is already well understood by many charities after the introduction of the fit and proper persons test. The concept of a manager of a charity and the differences between managers and trustees, which he also mentioned, are generally well understood. There are already examples in other HMRC legislation on gift aid, and other things that explain some of those differences. Of course, examples will be given in the guidance for this measure, but it might be useful if I give an example from my own experience. As I mentioned earlier, until recently I was the trustee of a charity that was called the Westminster Children’s Society but is now referred to as the London Early Years Foundation. Trustees are mentioned in clause 5, and they are the people who set the general direction of the charity and who have certain legal responsibilities. The hon. Member for Kilmarnock and Loudoun asked whether the manager would be the CEO, the CFO or someone who is responsible for the day-to-day management of the charity in discharging its activities. That is what HMRC sees as the manager. Again, it is important to point out that that term is well understood by many charities.

Fiona O'Donnell: I realise the Bill, when it becomes an Act, will apply only to charities that have been in existence for three years, but perhaps the term is not well understood, especially among smaller charities. I refer again to my example of the East Lothian food bank, which has no employed staff, but trustees and volunteers generally share responsibility for day-to-day operations. So perhaps the Minister needs to provide more clarity on that. There may not be the understanding out there that he thinks there is.

Sajid Javid: The hon. Lady makes a fair point. Many small charities may not have anyone who is paid in any way—they are all volunteers—and the unpaid people who are managing and discharging the charity’s activities are also the trustees. Every charity will have trustees and, especially with small charities, they and the management are quite often one and the same. In such cases, a trustee can also be a manager, so it turns out to be the same individual. I do not think anything here says that that is not possible. Many larger and better established charities will have professional management, whether or not they are paid—and often they are paid—with unpaid volunteer trustees who have different responsibilities.

Mark Durkan: The Minister rightly makes the point that clause 5 refers to trustees, but it refers to trustees as those who control the charity. Taking the example that has just been given of small charities that do not have professional managers and that rely on trustees merging, if part of the will for that merger is to create a more permanent management structure for the first time, it might be that none of the trustees of the merging charities see themselves as eligible or in any position to be a manager. So, the merged charities might have a manager for the first time. In the Minister’s example of small charities that do not have professional management, how could those charities qualify under the certification system if they do not have previous managers to be the managers? That is why he needs to address trustees.

Sajid Javid: I think the hon. Gentleman would accept that every charity has someone carrying out a management function. Otherwise, how would that charity discharge its charitable activities? If he is suggesting that the charity’s trustees—every charity will have trustees—are also acting as the managers, that may be the case. As I have said, in many small charities that probably is the case, but it is not the same as saying that the charity does not have managers. In such cases, where two small charities come together, they will have managers, albeit the managers may also be the trustees for both. It would be wrong to suggest that it is somehow possible to have a charity without a manager, because the next question would be how that charity actually discharges its charitable activities.

Mark Durkan: Is the Minister saying that, in interpreting the provision and deciding about issuing a certificate, HMRC will look not only at who the management staff are or are planned to be, but at trustees? It might be that at least 50% of trustees might count.

Sajid Javid: To be clear, when the managers are trustees and there is no distinction between them—for example, if there are two charities, in both of which the trustees are the managers and there are no managers other than the trustees—HMRC will look indirectly at the trustees, because they are also the managers. It will not look at them as trustees, but because, to meet the requirements of the clause, they are also the managers of the charity.

Fiona O'Donnell: The Minister is being good humoured and good natured in dealing with all our questions, but my point is about the real world in which charities exist. The fact is that, should two charities be merging with a view to appointing and paying a manager, their trustees, if they had previously acted as managers, are not—as trustees—allowed to receive any financial income from those charities. It is therefore unlikely that an existing trustee who has acted as a manager will become the new manager. Did the Minister follow that?

Sajid Javid: No. Will the hon. Lady explain the end of her question?

Fiona O'Donnell: My point was that, should two small charities merge with a view to appointing a paid manager, trustees who, in the eyes of HMRC, have been managers until that point would have a conflict of interest and would not be able to take on a paid management role. Certainly in Scotland, that is set out in the regulations and rules for charities.

Sajid Javid: I thank the hon. Lady for her clarification. In her example of two charities having merged and having decided that they want a new professional, paid manager, that new manager could not be counted as part of the 50% of the old management team. Clearly, however, that is okay because, as I have said, it is not a 100% requirement, so there is some flexibility.
The principle still stands, however, that a post-merger charity must have 50% of the previous management team. I will make that clear with an example. I am just picking a number, but I appreciate that each case will be different. If two charities each have 10 managers, after the merger 11—sorry, 10—of them must be from those two teams, with at least five from each charity, who together represent at least 50% of the management teams of the old charities.

Mark Durkan: The clause says more than that.

Sajid Javid: Sorry. It is 11, then. The hon. Gentleman has corrected me. In that example, the figure would be 11: if there are 10 in each charity, post-merger it must be 11 of the old teams to meet the condition in the clause.

Cathy Jamieson: Does the Minister accept that, although large charities may have 10 managers, many small charities looking to merge may have only one manager? How can two charities coming together, each with one manager, meet the 50% rule in any sensible way?

Sajid Javid: I accept that point. As I said, I used the example of 10 managers only for the purposes of illustration. I accept that circumstances will be different for each charity, particularly for small ones. To take the hon. Lady’s example, if each charity has one manager, post-merger the figure would have to be two—the figure must be more than half, so it would have to be two. Please keep in mind that, in that example, if there were only one, it would be more of a takeover than a merger. It is fair to say that the concept of a merger is two charities coming together rather than one taking over another.

Cathy Jamieson: With respect—the Minister is trying to explain a complex scenario—in the real world, when two charities come together but one manager decides to move on while the other remains in post, that would not necessarily mean that it was a takeover of one charity by another. That is a particular issue for small charities, in the sense that their expectation is that the two same people would be there at the point of the merger.

Sajid Javid: The hon. Lady has made a fair point. She will understand that, in framing the rule and rules in general to meet the eligibility criteria under the Bill, some bits can lead to an anomaly or something that is not intended. There is no perfect way in which to catch every possible eventuality of mergers.
The hon. Member for Foyle asked what would happen if some managers left post-merger, so the more than 50% requirement was no longer met. HMRC thought about that; we could have added new clauses and tried to capture such a possibility and say, “You can’t change for 12 months” or that the merger must stay in place for a certain period. However, we ruled out such a provision because guidance will be published on the matter. Given that the Bill is at least as long as the gift aid legislation, we do not want to overcomplicate it. We want to strike the right balance.
The hon. Gentleman used a good example of when some charities could change their management structure post-merger, but we must strike the right balance and find something that will work and deal with the worries that have been expressed. Hopefully, he will accept that we must draw the line somewhere; we think that the right balance has been struck.
The hon. Gentleman also referred to cross-border mergers of charities, as did the hon. Member for Kilmarnock and Loudoun. I assure them that nothing under the clause prevents the mergers of cross-border charities from happening, whether in England, Scotland or Northern Ireland, which the hon. Member for Foyle might have had in mind. He also asked whether the clauses would work for charities that are taking advantage of the community buildings rules. Yes, we were deliberately careful to draft the provisions to take that into account. If one charity benefited from the community buildings rules and was part of the merger, post-merger the new charity could still continue to take advantage of the rules.
My hon. Friend the Member for Amber Valley asked about mergers and connected charities rules. We dealt with connected charities previously and explained why the rules were in place. He also referred to tax years. Under the Bill, they can claim as merger charities after the merger or they can claim as individual charities before the merger. In either case, they would not be treated as connected. That is taken into account, and I hope that I have reassured my hon. Friend.

Nigel Mills: The reason for my concern is complicated. The connected charities rules deem that if the arrangement applies at any point in the tax year, it applies for the whole of the tax year. It would be hard for a collection of three charities merging into a new one if, at the instant before the merger, there was not to be a connection between the new charities and at least one of the ones that merge in, because the same individuals will be managing the bodies. While we intend that such a merger will be fine, there might be an accidental impact just before the merger, when the charity in question has become connected and therefore tripped itself out of all the claims for that year. I accept that after the merger, things may well be fine, but I am not sure what happens before that.

Sajid Javid: Perhaps I did not make myself clear; if so, I apologise. When two charities come together, they will be able to choose how they wish to be treated. They can either claim as a merged charity after the merger, or they can claim as individual charities before the merger, which may be relevant to my hon. Friend’s example. That is designed to ensure that there is no conflict with the connected charities rules. We have considered this provision carefully and think that it works.
As I understand it, the hon. Member for Kilmarnock and Loudoun is prepared to withdraw her amendment. However, just to be clear, I will be voting against clause stand part, and urge the Committee to join me in supporting new clauses 4 and 5 when we vote on them.

Cathy Jamieson: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 disagreed to.

clause stand part of the Bill.

Gareth Thomas: As I understand it, subsection (1) allows the Treasury to amend the £5,000 figure, which is the benchmark for the amount of small donations that need to be collected to achieve the maximum top-up payment available under this scheme of some £1,250.
Subsection (2), if I have read it correctly, appears to allow the £20 limit on cash donations to count towards that £5,000 figure—to be amended at some future point if the Treasury is so minded. My interpretation of the clause is that it is the Treasury’s “get out of jail” card. If all the other hoops that it has inserted into this scheme—the linking to gift aid; the requirement for three years of gift aid claims; the connected charities rule; the community buildings clauses; and the pages and pages of guidance that will have to be issued, never mind the complex issues that we have been discussing around mergers—fail to keep down the number of charities applying for the full £1,250 to the total sum the Treasury has thus far said in public it is willing to spend on the scheme, then the Treasury under clause 13 could bring down the £5,000 figure and could conceivably bring down the £10 cash donation figure.
If small charities jump through all those hoops, they could end up with less than the £1,250 they initially thought they would be able to achieve, or they could only register £10 of small cash donations, again making it even harder to claim the full amount. Admittedly, we on the Labour Benches and many in the charity sector that deal with the concerns of small charities do not believe that we are likely to see that scenario, but the Minister is defending a scheme that is so complex that far fewer charities than was claimed by the Chancellor of the Exchequer in his Budget statement will benefit from this small payments scheme. Nevertheless, it appears that the Treasury is taking a reserve power, almost, to limit still further the amount of money paid out to small charities.
Perhaps a more likely scenario, which we on the Opposition side can envisage, is that the Chancellor of the Exchequer might look for even more aggressive public spending cuts. It is worth remembering that we have already seen, by the National Council for Voluntary Organisations estimate, a likely £3.3 billion of support taken out of the charity sector by 2015 as a result of Government cuts.
So out of touch is the Chancellor of the Exchequer that no one on this side would be surprised if he changed his mind about the scheme. Perhaps he thought that the charity tax row—which appears to have influenced his mind in the preparation of the scheme, wanting to appease charities that were distinctly unhappy about the charity taxes proposed in the Budget—had been sufficiently forgotten that he could get away with reducing the amount of money available to small charities under this scheme.
We need to hear from the Minister in which scenarios he might want to use the two powers that he wants to keep under clause 13. One scenario that we posed on Second Reading was that the Treasury might want to increase the £5,000 figure in line with inflation; some charities clearly aspire for the Minister to show a generosity to them—he certainly did not when discussing the three years in seven rule, for example—and increase the £5,000 figure in line with inflation. Otherwise we risk seeing the 2.5% inflation that the Treasury expects to see year on year devalue the potential amount that charities can get under this scheme.
Let us take the example of the 2nd Bromsgrove Scout Association, one of the 40% of Scout troops in the Minister’s area not registered for gift aid. The 2nd Bromsgrove comes along to the charity event that the Minister is hosting in January, and which he is going to get HMRC officials to come to, and is persuaded to apply for gift aid. It waits for three years—possibly four years, depending on when it gets a gift aid claim in—and is excited by the thought of getting the full £1,250. However, if the Minister has not used the power under subsection (2) and uprated that £5,000 figure, the £1,250 that the 2nd Bromsgrove Scouts might have claimed will have substantially devalued because of the impact of inflation.
I do not know whether the Minister is worried about the 2nd Bromsgrove Scouts, but let us take another example. Stafford hospital, if there is such a hospital, may have a radio station. We do not know whether Stafford hospital is registered for gift aid, but let us assume that it is.

Jeremy Lefroy: I shall put the hon. Gentleman out of his misery. Stafford hospital does have a radio station—a very good one.

Gareth Thomas: I am delighted that Stafford hospital has a radio station. Although I am not sure whether the hon. Member for Stafford has had a chance to appear on it, I imagine his mellifluous tones would be very soothing for patients.
I also do not know whether Stafford hospital radio is registered for gift aid, but let us assume for now not only that it is, but that it has been for a significant time and has submitted gift aid claims for three of the last seven years. We shall assume, too, that a dedicated person is ready to read through at least—as I think the Minister said—another 60 or 80 pages of guidance, which is roughly the same amount that one has to wade through to register for gift aid and is what we expect will be produced to explain the scheme.
Let us assume that Stafford hospital has one such saint in its team, willing to go through that process. They put in a claim under the small grants scheme, expecting to be able to receive £1,250. Therefore, in 2015, they anticipate being able to get £1,250 worth of goods. However, in practice, because of inflation, unless the figure of £5,000 has been uprated, the value of what they can claim under the scheme will not be worth as much as it potentially would be in 2013.
It would be useful to hear whether the Minister intends to uprate the sum of £5,000 in line with inflation. I make no suggestion about whether he should; he will be weighing that up along with other questions, as part of examining the sorry state of public finances, which the Chancellor of the Exchequer has allowed to develop in his term in office. It would also be helpful to hear whether the Minister can assure the Committee that the figure of £5,000 will not be reduced at all between now and the next general election.

John Hemming: This is not exactly on the point that the shadow Minister is making, but on a personal basis, I was a member of the 1st Lickey Scout Group, a Bromsgrove Scout group, and also of the 271st Birmingham Scout Group. As I understand it, there is no 2nd Bromsgrove Scout Group, although there is a 1st and a 3rd. Is he trying to get phantom scout groups money out of the system?

Gareth Thomas: That is an interesting intervention, but I will not rise to the hon. Gentleman’s shocking attempt to draw me off the subject of my speech; I am sure that I would risk being out of order. However, let us continue to use the imaginary example of the 2nd Bromsgrove Scout Group, because helping to see how different parts of the Bill might affect real charities can only help to illuminate the practical impact of the legislation. Perhaps that will make it easier for the Minister and his advisers in HMRC to reduce the amount of guidance that is published.
It would also be helpful for the Minister to set out the context in which the figure of £20 might change. Mr Turner, as you are a dedicated reader of the Committee’s proceedings in Hansard, I know that even if you were not here when I gave this example, it will nevertheless be familiar to you. Imagine the situation, as we have before, of all the chief executives of legal loan shark companies such as Wonga coming together, wanting to make a donation.
Such is the amount of money that legal loan sharks make—and no doubt, the salaries that their chief executives receive—that £20 would be an extremely small sum. It is conceivable that the Minister might be persuaded to increase the figure for donations, although he has not done so yet. He has indicated that he believes that £20 is a reasonable sum. Nevertheless, he has the power, under clause 13(2), to vary it. It would be helpful to hear from the Minister in what context he might want to take advantage of that reserve power.
Perhaps one last example worth reflecting on is that of parent-teacher associations—charities set up to help state schools mainly, but others too. Some 84% of PTAs are not registered for gift aid, but let us imagine that the Amber Valley primary school parent-teachers association has the good fortune to be registered for gift aid, to have put claims in for gift aid in three of the past seven years, and to have someone sufficiently talented and patient to wade through all the guidance that the Minister will have to produce for the Bill.
That talented and patient person is looking forward to receiving the full £1,250. However, subsection (1) risks a situation where the Minister has reduced the £5,000 sum, potentially reducing the amount the Amber Valley primary school PTA might claim under the small grants scheme; alternatively, it might not receive full value for the £1,250 because Ministers have chosen not to uprate the £5,000 figure beyond 2013.
It would be useful to hear from the Minister how he sees those different examples playing out: Stafford hospital radio; the 2nd Bromsgrove—although following the intervention from the hon. Member for Birmingham, Yardley the Minister may want to focus on the circumstances of the 1st and 3rd Bromsgrove; I will not complain—and the Amber Valley primary school PTA. In those circumstances, what would he do about the £20 figure? In what circumstances might he vary that figure? Explaining that to us now might help to reduce the guidance by at least five pages. What are the circumstances in which he might amend the £5,000 figure, using the reserve power in subsection (1)?

Sajid Javid: I thank the hon. Gentleman for his comments. I particularly thank my hon. Friend the Member for Birmingham, Yardley for his superb intervention.
Clause 13 gives the Treasury the power to amend certain amounts set out in the Bill. The amounts that can be varied are the £5,000 limit on which charities can claim the top-up in a year, and the £20 limit on a small cash donation. The clause gives Government the power to vary the £5,000 annual limit for donations collected while running charitable activities in a community building, as well as the £5,000 limit for donations collected elsewhere. The power is included in the Bill to provide future flexibility for the design of the scheme without needing primary legislation. However, we have no current plans to use the power. Any change would need to be agreed by the House under the affirmative procedure.
The Government have announced that there will be a limit of £5,000 on small donations collected each year. Like all limits, it will be kept under review, but payments under the scheme must be restricted to keep a reasonable check on the overall costs of the scheme.

Gareth Thomas: Sadly, we are not blessed with the presence of the hon. Member for Banbury today, but we know that he is an enthusiast for the Church of England. Has the Minister considered the potential disappointment of many Churches—the Church of England, the Catholic Church and the nonconformist community—that there are no plans to increase the value of the £5,000 in line with inflation to reflect the hard work that they put into claiming gift aid and wading through all the guidance, which he will issue as part of the scheme?

Sajid Javid: As the hon. Gentleman knows, in putting together the legislation we had discussions with charities both on a trusted basis and in the evidence session. The Church of England is happy with the initiative that the Government have taken to introduce the legislation. I think that it is pleased with the £5,000 limit; that is its approach, rather than expressing disappointment at the figure being £5,000, which many charities would consider a good step forward.

Cathy Jamieson: To follow up the point that my hon. Friend made, the Minister has on occasion implied that the figure of £5,000 would have to be changed if the cost of the scheme increased. Does he agree that there is still lingering concern that that implies that there is an overall cap on the number of charities or the amount of money available?

Sajid Javid: There is no concern about the number of charities that might use the scheme. When the scheme is developed, the Government clearly need to take account of its overall cost to public finances. Within the terms of the scheme, as we have discussed, there will be eligibility criteria and there is no restriction on the number of charities that can take advantage of it.
We encourage all charities that meet the criteria to use the scheme. We are comfortable that the limits we have set—the £5,000 limit and the £20 small donations limit—will meet the spending envelope that the Government, with the help of the Office for Budget Responsibility, expect the scheme to cost. Although the two limits—£5,000 and £20—obviously have an impact on our overall estimate of the total cost of the scheme, we do not think of them as a limit on the number of charities.

Sheila Gilmore: During our debates, Government Members have thought that the Opposition were being pessimistic about the ability of small charities and so forth to make use of the scheme. We may indeed be unduly pessimistic and perhaps large numbers of organisations will apply. Am I to understand that there is an inherent financial limit, so that if we are wrong and lots of people come forward, that limit might be reached and there would be an intention to vary it downwards?

Sajid Javid: I do not think that the hon. Lady is right to think that. The only financial limits imposed are the two that we are talking about now—the £5,000 limit on the overall amount of donations and the £20 limit on what can be classified as a small donation. To put her and the hon. Gentleman’s minds at rest, the Government have no intention of changing the limits, and that includes in a downward direction. We have no plans at all to cut the £5,000 or the £20 numbers. If she will allow me to finish, I may answer any other questions she has.
It is sensible, and normal in legislation of this type, for the Government to have flexibility in the numbers, so that if they or a future Government wish to change the limits, there is no need for primary legislation, although such a change would be debated in the House and require an affirmative resolution. It is sensible to include such flexibility in the Bill.
The hon. Member for Harrow West talked about the link to inflation. The Government have no plans to link the figures to inflation. As I said, we will monitor the scheme over time, and if the limits need to be changed, they can be. It is also useful for many charities, and particularly smaller ones, to have a nice round number—£5,000 and £20—that can be explained to volunteers and helpers, rather than numbers that by being linked to inflation would change by small amounts every year. That could add to the management pressures on smaller charities.
The hon. Member for Harrow West also asked about the figure of £20.

Gareth Thomas: The Opposition certainly accept that charities will be nervous of any more complexity in the scheme, but if they go through all the different hoops and apply for a payment they will nevertheless want to feel confident that what they get will retain its value by being increased in line with inflation. Such are the difficult circumstances for small charities, partly because of the spending decisions taken by the Government. I suggest that the Minister should not be so complacent about small charities’ desire to maximise their income.

Sajid Javid: It would be grossly unfair to accuse the Government of a complacent approach. Both sides of the House have agreed on the general principles of the Bill and why it is good for the charitable sector.
We have discussed the £20 before, but it is worth repeating that it is about small cash donations to charities. When the Government proposed the Bill, they had £10 in mind, but that has been increased to £20. That was done after consultation with charities. It was important to get their feedback. It is fair to say that most charities with which the Government discussed the issue, or which gave feedback, felt comfortable that £20 was the right sum when trying to capture small cash donations.

Mark Durkan: Clause 13(2) provides the Treasury with the power to amend paragraph 1(1) to the schedule. Will the Minister confirm that that power of amendment is to be used strictly in relation to the sum of £20 and not in relation to the form of donation? Given what the Minister has said previously about keeping matters under review, and about a three-year review, could clause 13 have been more widely drafted, so that the power to amend paragraph 1(1) would be the power not just to alter the sum, but to remove the restriction to cash payments? The form of donation, as well as the sum, might then be changed.

Sajid Javid: I confirm that the power can be used only to change the £20 limit, not the form of the donation. I will not discuss the question of the form of donation; we have discussed it before.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14 - Top-up payments not taxable

Question proposed, That the clause stand part of the Bill.

Cathy Jamieson: I can be brief. The explanatory notes point out that the top-up payment received under the scheme is not taxable in the hands of the charity or the community amateur sports club.

The Chair adjourned the Committee without Question put (Standing Order No. 88.)

Adjourned till this day at Two o’clock.